The deputy governor of the People’s Bank of China, Yi Gang, said that policymakers are monitoring China’s surging bank lending, but that on balance new lending has been positive for the country’s economy.
“Of course [there are concerns] about whether this is sustainable and also it might have some negative implications for the risk. We realize the negative side and the possible potential risk. But if you weigh the benefit and the cost overall, I think it’s a positive development,” he said.
Yi, who was responding to questions from the audience in a business forum in Beijing, added that he hoped bank lending for the remainder of the year would be “stabilized at a sustainable rate.”
In response to a question regarding China’s continued appetite for purchasing US debt, Yi said that China, as a large holder of US assets, would be “responsible” but that he hoped that US policies would result in a stable dollar.
“A stable dollar is good for all parties,” he said.
Yi said that Chinese financial institutions and enterprises need more sophisticated hedging tools such as derivatives and swaps, but that the country has already made “significant” progress in developing simple derivative products. He noted that China’s financial regulators are conducting studies about developing the derivatives market in China, though this will be a lengthy process.
“It takes time to do the coordination and also to assess the potential risk so that in this regard, the product coming to the market still takes some time,” he said.